Congress apparently has decided to wait until early next year before tackling the question of whether to change its 1976 decision toughening the tax treatment of Americans working abroad.
Although technically the measure still could come up before tomorrow's adjournment, congressional leaders have decided not to try to push through a second postponement of the 1976 crackdown, as had been scheduled previously.
Instead, the lawmakers will begin again in January or February to try to hammer out a compromise between "tax reform" advocates who want the 1976 legislation to stand intact and industry lobbyists who want the breaks restored.
Those involved in the dispute belived Congress will work out some sort of agreement that will make provision in the law for high rent and education costs in Saudi Arabia and other inflation-prone countries.
All sides in the dispute had agreed informally to another one-year postponement of the 1976 changes - a move designed to buy time until a longer-range compromise could be worked out. That would have postponed any toughening until 1978.
However, that measure was blocked last week by Sen. William Proxmire (D-Wis.), who invoked senatorial privilege to keep the legislation from the floor. Proxmire issued a statement yesterday criticizing the current tax breaks as a benefit for "mink-swatherd Americans abroad."
There was virtually no opposition when Congress toughened the tax treatment of Americans working abroad in 1976. However, in recent months the tightening has drawn vigorous protests, primarily from construction firms doing business in high-cost areas.
Early last spring, Congress voted to delay imposition of the 1976 changes until the start of the current tax year (the 1976 bill had made them retroactive to January of that year).
The decision not to consider a second postponement means the 1976 changes will apply to income earned this year. However, since Americans living abroad do not have to file tax returns until June. Congress presumably still would have time to revamp the law if it wants to.
Proxmire's statement yesterday criticized the Treasury for "its zealous support of a last-minute, end-of-the-year, end-run attempt to amend the tax laws at a cost to the taxpayers of over $400 million this year."
Actually, however, the Treasury announced its decision in October reluctantly, in the face of insistence by key congressional leaders that more time was needed to work out a compromise in the controversy.
Official estimates show the 1976 changes would bring in an additional $228 million in revenues over previous law, not $400 million. The $400 million figure refers to the total cost of the entire tax break not just the portion eliminated in 1976.